This article appears in the Summer 2018 issue of The American Prospect magazine. Subscribe here.

The Trump tax cuts have been categorized as a war on blue America. Limiting the state and local tax (SALT) deduction to $10,000 punishes residents of high-tax liberal states willing to pay for good services in places like New York, California, and Maryland. An additional cap on the mortgage interest deduction for loans above $750,000 raises taxes on homeowners in pricey areas, also typically along the coasts.

But while blue states are certainly singled out in the tax law, officials have downplayed exactly who gets targeted—those wealthy enough to itemize deductions in the first place. Numbers from the Joint Committee on Taxation show that 70 percent of SALT deductions flow to households making more than $200,000 a year. And that very group—well-off people from high-tax states—also benefits from one of the most obscure but wide-ranging individual perks in the bill: the near-total shelving of the alternative minimum tax (AMT).

A minimum tax on the rich was first enacted in 1969, to assure that no matter how many deductions and exemptions wealthy people and their accountants piled up, they would at least pay some tax. But after several decades of weakening and its inclusion as the coup de grace in the 2018 tax legislation, the AMT now has such extreme exemptions and phase-outs that it will hit almost nobody.

The impact is intense: a reduction in federal revenues of $637.1 billion over the next decade. That's roughly equivalent to the $668.4 billion in increased revenue from the SALT changes—so what Trump takes from the wealthy in one hand, he gives back with the other. And with states trying to reinstate the SALT benefits, the affluent could get a double bonus.

The maddening complexity and poor design of the AMT was part of the reason for its demise, but the effect will be to dramatically cut taxes on the richest 5 percent of income earners. Not only does this offset the supposed targeting of liberal elites, it stings from a tax fairness standpoint. If corporations, the super-rich, and now the merely rich are put off-limits to reasonable taxation, everyone else will bear the burden. And it gives fuel to the common refrain from deficit hawks that we cannot afford progressive priorities. The situation reveals that it isn't just the 1 percent who block progressive taxation, but those just below on the income scale, who have the greater numbers, the cleaner reputation, and the ear of policymakers to stop dead even the most sensible policies.

A JANUARY 1969 report, delivered by Treasury Secretary Joseph Barr at the tail end of the Johnson administration, informed Congress that 155 families making over $200,000 a year paid no income tax in 1966. This reportedly triggered more angry letters from constituents in 1969 than the Vietnam War.

That led to the creation of a minimum tax, which was modified in 1982 into the AMT we know today, essentially a parallel tax system calculated by wealthy filers after their initial tax return, stripped of certain deductions and exemptions (including the SALT deduction). The larger of the two results serves as the tax owed. In the one tax return we have of Donald Trump's, from 2005, he famously paid an additional $31 million to the government because of the AMT.

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Congress did one thing wrong, however: They never indexed the AMT for inflation. This meant that it could dip down from the top one percent into the upper middle class. The Bush tax cuts, which slashed income at the top, did not alter the AMT's minimums, also making it easier to travel further down the income scale.

To many this was ridiculous: A tax fairness measure aimed at the very top had ballooned into something threatening millions, exponentially increasing the complexity of the tax code.

But while the mechanism was crude, the AMT was always merely a deduction limitation that kept federal taxes more progressive. And even at its height, the AMT never affected more than a small percentage of families. But because it hit around 60 percent of households making between $200,000 and $500,000, and 45 percent of those between $500,000 and $1 million, it created a constituency of rich revolutionaries with clout. That included members of Congress, nearly all of whom fall into this category of wealth.

So Congress started passing annual patches, protecting the not quite super-rich from paying the tax. Mind you, these were still families in the upper echelons of society, but they had the influence to lower their tax rate without the stigma of being so fabulously wealthy that their self-dealing would be demonized. An AMT patch even appeared in the 2009 stimulus, though its stimulative effect was questionable since Congress passed something similar almost every year.

After 19 patches in 44 years, the AMT finally got permanently indexed to inflation in 2013, in the fiscal cliff deal. You would think this would've been the end of the caterwauling, but Trump's Congress, in its never-ending efforts to protect the wealthy from taxation, delivered the final blow. The House version of the tax bill would have done away with the AMT entirely; a compromise with the Senate merely made it mostly impotent.

The compromise increases exemptions that taxpayers subtract from their AMT liability, up to $70,300 for a single filer and $109,400 for married couples. The phase-outs for reducing this exemption spike to $500,000 in income for singles and $1 million for couples. The Tax Foundation estimates this will “dramatically limit” the number of households that will pay. Under the old law, 5.25 million households would be subject to the AMT; under the new one, only 200,000 will need to pay. However, high-income earners will still likely have to check if they qualify, meaning that Paul Ryan's alleged “tax simplification” reform will be just as complex as ever, forcing many to calculate taxes twice.

IN THE END,however, the rich and near-rich got what they wanted—relief from the AMT. Technically speaking, the provision expires at the end of 2025, at which point the AMT would go back to the old system. But with so much money on the line for a large group of important people, the odds that the new changes will get extended are pretty large.

That's a problem for progressive governance. To make the tax code fair, liberals need serious taxes on millionaires and billionaires; but those just below that level have to pay a reasonable level of taxes as well. There simply aren't enough ultra-wealthy people. Progressives have big goals—single-payer health care, free public colleges, a federal job guarantee—and while there are plenty of resources available for this, constantly handing out tax breaks for anyone with a big megaphone makes things far more difficult to manage.

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You could see the power of the near-rich in the saga of the Obama-era proposal to end tax-free college savings accounts known as 529 plans, which disproportionately benefited well-off families. Obama would have redirected 529 revenues to expanded tax credits for higher education for the middle class. But the concept triggered an uproar among affluent savers who used 529s for their children; within a week the administration withdrew the proposal.

With that kind of a lock on perks for the top slice of the population, those in the lower half will always struggle to obtain a fair share of benefits. There are worse parts of the tax law than the individual AMT changes—after all, the AMT for corporations was eliminated entirely—but there may not be a worse outcome for the dreams of progressive, activist government.

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